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Common Reporting Standard

For the OECD (Organisation for Economic Co-operation and Development), CRS is a major movement towards a globally coordinated approach to disclosure of income earned by both individuals and organisations.

TMF Group, with over 7,000 experts in over 83 countries, provides Common Reporting Standards (CRS) services as part of its Global Information Reporting capabilities. We assist with CRS classification, due diligence and reporting.

As a measure to increase tax compliance, CRS builds upon other information sharing legislation, such as FATCA (the US Foreign Account Tax Compliance Act) which came into full force in 2014. FATCA reports are filed by financial institutions for all US citizens living abroad, detailing their foreign accounts. CRS fulfils a similar purpose by ensuring that, on an annual basis, the details of financial accounts in relevant participating jurisdictions make their way back to the relevant tax authorities where the account owner is a resident. The CRS initiative resulted from:

An increase in entities doing business internationally and the availability of online banking platforms that made it easier for taxpayers to manage accounts and assets offshore, leading to potentially escaping scrutiny in their home tax authority; and

Increase political and financial pressure on governments to drive tax transparency and compliance.

All entities classified as financial institutions that maintain financial accounts of reportable persons have obligations under CRS. To be compliant, entities will need to confirm both that:

A. They are a financial institution.

B. And comply with their reporting obligations.

A financial institution must review its financial accounts annually and, if applicable, report to the local tax authority on the financial account as well as the account holders. The information is then exchanged with the competent authority of the account holders’ tax residency jurisdiction.

The OECD have put forward a global standard for the annual automatic exchange of financial account information which was endorsed by the G20. It covers; how information is reported, what the financial institutions are required to report, which accounts are required to report and due diligence procedures.

In summary, CRS should give governments worldwide a clear picture of the assets of their tax residents outside their own jurisdictions.

The Consequences of Non-compliance

The notified competent authority will take all appropriate measures under domestic law to address any errors or non-compliance which could result in fines. Managers, Directors, Trustees and others, providing services to entities under scope may also be held liable.

Deadlines

There are two groups of jurisdictions that have agreed to adhere to CRS. The first group, ‘early adopters’, will report information to their tax authorities, with exchange starting by early September 2017. Information exchanged will consist of account details related to the 2016 book year.

The second group, ‘late adopters’ should start reporting and exchanging information in 2018.

How can TMF Group help?

CRS Entity Classification

Entities have to determine whether they are a reporting financial institution. TMF Group has developed a classification tool based on the CRS global standard, producing a valid CRS classification.

CRS on boarding and due diligence of new entity accounts and new individual accounts

We assist entities with their due diligence forms for CRS purposes. From collection to review of each account holder’s Anti-Money Laundering and Know Your Customer documentation. We determine whether any CRS indicia or information inconsistencies exist and assist the account holder by properly informing and working on the curing of such.

CRS pre-existing account due diligence and enhanced file review

CRS due diligence is mandatory for pre-existing accounts. When there is a “change in circumstance” with a pre-existing account we assist with a new classification where needed and record the proper new CRS status within 90 days. We help in collecting the new self-certification form and required documentation, as prescribed under CRS.

CRS Reporting

In line with CRS, entities have to submit information to the local tax authority. We have set up a service on behalf of our clients to prepare and transmit annual reports on the reportable accounts, related financial account information and personal information in accordance with CRS regulations.